RMR - Earnings call 1 2024 | The RMR Group Inc.

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Operator

Good morning, and welcome to the RMR Group Fiscal First Quarter 2024 Earnings Call. [Operator Instructions] Please note that this event is being recorded.

I would now like to turn the conference over to Kevin Barry, Senior Director of Investor Relations. Please go ahead.

Kevin Barry

Good morning, and thank you for joining RMR's First Quarter Fiscal 2024 Conference Call. call Officer, and Matt today's and Adam on Financial Chief Jordan. me are CEO, President Portnoy; With In just question-and-answer a our business moment, they will quarterly followed provide results, by a session. and details about

other that the I would conference is Private meaning call the expectations of without prohibited securities on contains recording of Securities retransmission of laws. prior forward-looking project. Litigation consent XXXX Reform Today's and based and of the Act call written the statements the differ company. those XXXX, like RMR's February today's and beliefs may and materially as of today, forward-looking are note to results conference statements that These within actual from we

revision to forward-looking in undertakes conference made no the call. to today's company publicly obligation any release or statements The of revise the results

the concerning is cause Investors factors filings upon our website could in at our forward-looking to be undue statements. on are Securities not that Exchange information found those and www.rmrgroup.com. contained place Additional differences cautioned Commission, any can which reliance with

distributable net of accordance income, and EBITDA financial accepted can our we in discuss A to share, adjusted results. EBITDA per accounting during per be share, with income, numbers margin EBITDA U.S. calculation principles earnings, adjusted adjusted net generally may income adjusted non-GAAP this adjusted earnings including earnings, earnings net determined adjusted the of call, EBITDA adjusted reconciliation adjusted and found margin. distributable addition, In in

to call turn now will over the I Adam.

Adam Portnoy

Thanks, thank Kevin, all and you morning. us joining for this

question real has property since Reserve markets in values real to me The deterioration interest capital discuss update began providing early pressure the in headwinds our let commercial the cost macro activity. on capital commercial estate no environment. is raising significant an of estate has a first under higher and Federal rates first in resulted results, quarter XXXX. been There Before that

GDP this we growth, sit inflation. generally interest as continues and market perform a signs real are strong declining here cuts we the entering are healthy currently With today, to year, However, later well believe as for economy a U.S. environment with labor I we anticipated commercial seeing estate. favorable positive more rate

Looking the highly and commercial our I clients opportunity the diversity portfolio, for several normalizes. durability we in platform confident diversified across to encouraging also benefit are strength, and and sector of trends real our the see our estate as

operations our results. first quarterly to delivered cycles. quarter strength reported continued We estate share that real adjusted now strong the per growth of the sequential Turning high our end our that earnings a through RMR and exceeded stability guidance. reflects all of and

we quarter, $X.XX per This reported adjusted EBITDA margin XX.X%. distributable of earnings share, and million of of EBITDA adjusted $XX.X

and We continue plans also of results share the clients their alignment the focused business from capitalize prices significant on and on our our remain to recovery that strong in upside some Our between publicly clients. exists execution traded the of possible our RMR to demonstrate with clients. assisting expect at a

base on into this management value basis. an are managed put enterprise our business paying REITs context, To of fees equity all

total annualized managed a opportunity to historical $XX equity and the costs work as Given million revenue between the we value our gap have REITs. stock the prices, more the levels of of enterprise we at depressed than close

at by quarter's capital during or drive revenue clients percentage their recent all RMR, more. At supported at this our helped of the growth end, in we this share which actions perpetual quarter, prices growth achieved taken double-digit have

knowledge, partners. deep residential multifamily In estate market professionals acquisition closed value-add mid-December, XXX relationships platform approximately experience global CARROLL the adds and we long-term high-quality estate real number institutional with acquisition. of with The real a successfully

largely RMR which XX business, units, under Sunbelt. located $X.X properties with than XX, management we December Residential, are of calling more of at assets XX,XXX now consisted billion across As CARROLL the the of

acquisition, or AUM private this XX% more this capital of $XX more result now AUM of quarter billion billion, $XX RMR represents As and than XX% approximately at grew to a than our over sequentially total AUM. total

We the business of the our by last assets specifically, this was or been future, gross management metrics partner long-term ] which as for over are strategic ago. to part believe realized X be Fund remaining, part years RMR has Residential And years. residential just we proud $XXX growing [ that capabilities given in under equity VII growth is capital of million X for company has close especially approximately acquisition private equates fund of approximately properties. capital in objective $X the We general these of our where billion to current CARROLL assumed acquisition, which a available in significant few the there to

terms transaction activity residential as the market expectations and are this for spreads of capital, In tightening remained residential while optimistic have subdued, are expectations cautiously transactions bid-ask of deployment progresses. for turning general more year

the Accordingly, business an calendar year second and to the before first earnings of year. our contributions the in increase expected of financial distributable in in the expectations for significant half half EBITDA calendar are residential the muted

with giving our to Residential, $XXX growth opportunities evaluating continue create cash the the and million build that us capital private shareholders. AUM and of long-term more capabilities, RMR value our RMR's no flexibility quarter beyond ended Looking expand on we than for existing corporate debt,

was $XXX XXXX made financial In December, zero-coupon repay net million maturities. to its clients are debt towards discuss million advance publicly $XXX of DHC in traded progress results across limited we as of note to this With are bonds. our clients. reminder, said, that of of what public generated strengthening as can some issuing The reporting DHC's to quarter of highlight notes we wanted I announcements regarding used we profile, them. significant our a all proceeds As that approximately

capital DHC liquidity in the the SHOP necessary the compliance back DHC excellent access in portfolio, its drive to continue an is debt Importantly, financing its this puts living the unencumbered and lower positions with and a recovery financing to covenants in communities. cost fully senior ample and position future, funding in GSE with company

closed to for maturities execute revolver. financings a debt financing taken month, new office secured capital million remain also group new with successfully $XXX especially banks and its conditions its unsecured for owners. has despite replacing XX previous facilities OPI challenging market of address that significant Last OPI actions

OPI $XXX million and its a million secured unsecured the notes night, maturing senior offering redemption X-year last of May. Additionally, priced announced senior $XXX bond this

These positions recent successful as a office market backdrop, financings for well to of difficult REIT strength as going RMR's at management assets OPI the within and well speaks forward. OPI OPI's

Realty continued Hills Seven REIT, returns its mortgage outsized our shareholders. has to generate for Trust Lastly,

in returns Seven a total have During strength remained its strong contributed shareholder our active a banks has believe XX% of platform's the the book best-in-class and and and broadly to pulled than return period in more on when lending, capital estate under management ultimately investment our can commercial of to expand are management underwriting Hills capabilities XXXX. leverage assets private real we We future. back lending and asset loan something

start we a strong XXXX. closing, to are off In in

We and We are position updating forward to the you taking on increased our meaningful to throughout our actions for process long-term our ongoing for clients stakeholders. RMR deliver growth look value and year.

now Matt Officer, Chief I'll turn Financial call and results review our the Vice financial will Executive President quarter. Jordan, that, With who over for our to the

Matthew Jordan

good morning, everyone. and Adam, Thanks,

of $X.XX of distributable first the net and per per share, earnings of $X.XX adjusted $XX.X reported share. For million quarter, income adjusted EBITDA we

fees of exceeded in improvements as coming certain well in equity construction the our than end guidance, managed as values Our stronger REITs. results primarily of high our of expected the enterprise due management to

As closed December CARROLL Adam the acquisition highlighted earlier, we on XX.

back across in excited long-term RMR the accretion earnings real remain Residential of estate we year for the acquisition begin from platform residential the about While the XXXX to our volume the sector. lack given calendar half transaction the contributions to we of expect of

to Our of the in 'XX. residential first result X months AUM, than far calendar platform will breakeven results in billion is manage more its $X.X built current for which

service primarily portfolio. to the million, Turning Recurring were increases which $XXX,XXX our exceeded was to managed due REITs improvements our value at quarter This activity revenues almost hotel SVC's this enterprise $XX.X results. equity expectations in construction quarter's and sequentially. increase management within up for

equity million to Residential and expect in our the projected quarter, $XX to upon revenues million. and we declines RMR million it values in revenues, current based between next of enterprise volumes $XX As $X.X approximately be relates construction managed service REITs,

sequentially an streamline by and strategic $XXX,XXX million merit quarter to the effective X $X.X the expenses. $XX.X partially undertaken were Turning to annual October of increases offset partial Cash actions related that approximately compensation million, over Residential, was compensation in this to to due RMR months month increase we've XX our of impact last operations.

RMR ahead compensation next we expect million approximately increase Looking of Residential. inclusive to quarter, cash $XX to to

is first reset contributions XXX(k) January as quarter year level X. payroll tax each compensation of of always our The calendar and each highest

In quarter, rate reimbursement first our XX.X%. cash compensation was the

than higher approximately costs support of million G&A projected addition the in to increase cash increases activity expected costs of to XX% experienced sizable RMR we Residential, to is to reimbursement in quarter. quarter. were this $X.X With rate increase construction due help the third-party next our

Residential, $XX of quarter. should inclusion the G&A RMR approximately With million be next

the and lower be all accounting, purchase share previously from quarter, assumptions $XXX,XXX expect impacts $X.XX approximately income Aggregating per $X.XX. adjusted earnings I of share resulting interest from in adverse incremental factoring per of next the amortization outlined and we to

and to the are most we impacts becoming distributable With important increased our believe levels earnings measures. adjusted noncash our EBITDA of earnings,

from quarter, Next to EBITDA we $XX adjusted range million to expect million. $XX.X

relates to it as earnings. Finally, distributable

share. Next to and $X.XX range from it historical $X.XX closer averages quarter, per expect to be to we

the would line to you concludes open questions. That our formal Operator, remarks. please

Operator

Maher with Securities. [Operator B. The question Instructions] Bryan Riley comes from first

Bryan Maher

recovery challenges, seeing what little Adam still in of billion, off Can Maybe to with the an talking what prepared kind PM on give runs seems it more started big out in upon and on picture XXXX color ran your I week, large you there about a shoots -- somewhat Matt. with. a on us whereas comments. be how call earlier guess XXXX faces in to to you a basis, touched green positivity? that bit you're Adam, last Barron's start give $XX real see We you consistent this they you estate article was

Adam Portnoy

question, that for you Bryan. Thank Sure.

I think that is correct.

in maybe of think or And the office second retail and biggest and estate, capital can that a around markets faring a to I unfreezing for a real estate interest is that access capital for then activity. positive the is estate some happen rates. markets happen especially real reduction real can pockets maybe positive biggest of impact

Street will they being access it's believed very country anymore. we rates our I our given depth I rates raising is to that -- I been improve. interest is And Wall about given that all many or experience fact attractive that debate I estate. throughout I that conditions fortunate our macro reduce just pretty relationships pretty pretty we the and able think and not the commercial think, much there's is would think that believe That really in capital the I were our peers think how need able to in more given be the on positive area. robust fast platform have not do RMR, think of of Fed when I said, all that rates universally think to real for the a expertise

seen secured still heightened that because in no an came scrutiny on it's some capital financing is And banks that a the able banks has asset what that an the in the are office, XX just to is gets get matter at and have -- OPI REIT. fact markets OPI that to going a markets. portfolio. also there is we well strong the Yes. managed, where along we -- part is XX for in It you indication a capital office thawing fact it's class that with of participate strong were and but

all So signs. see those positive I as

as terms reasonably biggest fundamentals is the probably best that organization that In you what happened. to an basis that And years. see [ ] and sign and I think comparative And we in look, to office to in activity currently leasing a what's continues occur. operations, a on have happened past, it's is activity past saw the of than we -- still leasing happening equal on it and equal

activity of So our we portfolio. haven't seen leasing in terms activity drop-off in in a big

longer. a certainly obviously, highest speaking, in office rates, if the said, not pretty vacancy Frankly they've That been being are generation, in generally high.

And might we're rates strong weighs it managing, on portfolio, that -- entire a so and affects you on. the while charge that can market and have rental we so

really capital are fact and are interest that shoots going aren't unfreeze. anymore, that down to green fact and they're coming the rates the up probably markets the So starting buying

be half of volume. And in a this to especially expect more lot second to transaction expect the participant see this in volume. We significant year, we a transaction

pockets opportunities amount also tremendous well. of work the in have bought as the a have other can to organization at that use, we And powder dry We Residential RMR work parts there. to as capital we we in put put especially of

to year really way. we're second half a and turn the So being we're to much pretty much in the our really more attention of able meaningful to -- forward looking growth

Bryan Maher

I of of we come And acquisitions? you. about of kind so deploy is get the year mean, you growth? follow-up. maybe just growth? from less it half what capital to a bit us, need kind that RMR this little Residential, think On that new How might And to a that to to come should And Does organically? bolt-on does back

Adam Portnoy

end the equity capital. 'XX So RMR is that -- what we in a fund, fund that Fund But there what said deploy have general and details. we means or partnership of remarks, to the Residential, as call inherited -- time million go a into does that prepared -- until a we untapped have it's I I life my is of $XXX fund, about VII won't we that acquired

runway, fair of put money we a X So that years to have amount out.

it's a and bring GP $X you to put you power. billion buying leverage that's fund, you Because LPs how the in get of on,

our So we're up it, do 'XX, the could think we -- talk as think possibly really gearing -- grow are and in first however funds, what areas about really, And largely vehicles. to we that. we're I you us further co-mingled, is -- raise that's up well closed-end where And basically get call other want see you I setting private we into don't to capital to true organic. 'XX I

positioned are residential. basically to loan I the and fund and that's to a to raise X fund best going be in we fund that the in loans is fund areas going a try to that around be think or then leverage perhaps making

I money in we to plenty more think vehicle. work the have our put space, existing under to I -- of think have residential we runway

I what organic, went all that's Bryan. so through, And just

not or That's at I all of And talking the on acquisitions. there million M&A cash. M&A we -- $XXX I'm front, about think have

no corporate have debt. We

but opportunistic, significant it the contributor we a ways as focused appealing getting RMR at our successfully We will and about in on will the integrating be to raise the of EBITDA well the funds to half that moment be year and think as second we're thinking be also and Residential particularly platform organically to investors. very to earnings strategies

else... Now anything

Matthew Jordan

with year, engaged legacy on. of out that that can business the with to out. thawing out are some the I committed we partners. partners, back of guess what would that we've and plays thawing They I you, continuing add, capital half to really quickly of as the inherited we've all do with tell the Bryan, the is organization the pleased team can put plays think are and the touched as I as CARROLL Adam

-- year. work. to their historical had organization of do part think we the us, organization they the can legacy they've -- what run billion which attracted billion rate, easily $X a When to was $X in of put 'XX, And

team And partners are think platform. believe growth out, we So we we are accelerate and addition. very quickly once plays can that that the the happy aligned inherited out, thawing EBITDA the with thawing at RMR residential plays we've this as with the

Operator

The from next Tyler Batory Oppenheimer. Instructions] comes with [Operator question

Tyler Batory

up us thinking in side certainly of XXXX specific a residential year with be as on Just well. terms kind commentary a of -- what remind to ramping bit Any Residential talk Can chance could financial term, some the year? about little things? helpful finer second that this of in of put some this the really that around the for of longer think there. in numbers business you're term and I from RMR of putting And pretty you Adam, the commentary terms EBITDA half longer you impact and the contribution of more point terms outlook

Adam Portnoy

Sure.

remarks, So really, we in about our prepared talked it.

dormant here year out we about The been first have as a year. the backdrop stuff. mean then its restarting which -- of for expect to do trying it up. up part calendar think we're business That's doesn't expectation. acquisition largely last over through year, be half to year, June breakeven And ramps breakeven you not a and of is machine because running to gets just the a business. And it's it this We and of year, the this just of our of the first the you and of issue X of we're kind again. half unfortunately, lot has transaction that sort getting of activity. We

EBITDA. think When we talked run $XX of rate. CARROLL we we the announced I million $XX is to expecting presentation, million million out $XX a of roughly put what were we EBITDA a as about acquisition,

we close Xx. the at I It were expectations of last of almost were close the we to actually the didn't we One, ended -- thought little year that the If end think took maybe longer did. the part have time close. we beginning fourth a year, to our of thought of done than the we fourth we and at sooner would quarter quarter. the being up end going

that expectations the wasn't transaction continue very market thing of look our was And different to our the stay general other to than at activity. volume was meaning a lot there muted, conditions

So taking that of actually is market longer. it's played cycle out the part

$XX year. business We generate are of EBITDA this per still bullish over that will million

I and of calendar ramp that 'XX are really fourth when that is starts we expecting think up. really to quarter third really happening

think And to million $XX possibilities we will EBITDA or even as than we million number. get I million into $XX 'XX, $XX see greater that of

we capital we think well. raise capital matures as ramp the third-party really as as raise as more we can -- put business there I it out up as more

point, of So sort finer the that's Matt.

Matthew Jordan

everything. That's

Tyler Batory

Okay.

next QX? fiscal item? And Great. that a than why rest year for what of thought one. little construction are a follow-up, and the just quick fees, The line in expecting you Okay. quarter the you better My bit

Matthew Jordan

for be delays, end operators, calendar so science, many the think the as never they real matter spend, people estate and year, is we construction Yes. year. chain things The the of of it activity use And tends to construction approach happen supply end I that budget a the whether their as -- permitting, hit it's just the exact of an estimating -- us. up accelerated

a into good was renovations favorably hotel that thing. So which it's place were with a fell just number of things underway, some

you minimize spend when as stick to and tried restart And then time. over, down. it year the certain to again tends hockey start much their we've as over start slows that budgets People the

this -- quarter, about next So fees. we construction million $X in generated

about expect it number expect -- year we back as trend ramp play the $X we way to to again We back that $X and towards quarter, out. Next all quarters that not to then plays the we'll million back calendar out. clearly be million, but up the as get may

Operator

comes Stanley. Our with next Morgan question from Ronald Kamdem

Ronald Kamdem

Just going RMR Residential. to back

gets so year you're EBITDA in -- going is deployed, And going the LPs. that's market when in So the in for GP market, understanding back that the be of be capital and the to as basically, XXXX? the to into ramp half the fundraising that starts to the this

And you announcement. the I that? what earnout, the can sort that correct? do think, an looking because you with -- then And what talk Can be have we was the in of earnout is for at -- factors I there about -- should about how talk

Adam Portnoy

Yes. Sure.

way the VII we're we it. more is will earnout that year, parameters yes, first and capital deploying So Fund the The second deployed And of how be that that 'XX. around into of of half and to as by there refer it will we get and the how that you end 'XX. based the on capital much we is accelerate as as certain off, into gets generally, are get we is the what about deploying capital thinking it described

Matthew Jordan

Yes. really It's Ron. ratably,

ratably everything that -- to but earned $XX XXX $XX first count million million doesn't the million above the starts, $XX earnout, As $XX forward. from the million gets

aligns So getting here, it that everyone we're money out.

a how revenues the I deployment money and just property -- Residential manager. guess, it's deals largely big remind I management Ron, the side, they're is RMR But on the management then just on fees. make folks is as say they think and construction earn and and are revenue acquired contribution of important on can to acquisition And on to EBITDA hit I

money residential acquisition made, points XX new the they're GP current basis getting on fund as acquisition is each So from under that are deals fee. an deployed of about and the business construct their

money revenue. to So will ramping business generate out this putting and impacts immediately sizable up

Ronald Kamdem

but in you Got is just is X it's my so of of of talked wealth interest part I some assets. it. but And the second unrelated, think question on kind sort funds X-parter, -- really sovereign about a sort of

like are the in your there from And your curious more conversations some of funds of do with -- are assets? opportunities JVs? terms to going sovereign those Just wealth how

all the And to Is else it's, the for is part of X, quarter, so anything be I million the should fiscal $XX guidance which is it's $XX unrelated, because mindful second million we -- there million. just or guess, G&A? it Or EBITDA of? $XX dipping

Matthew Jordan

revenue second the take because hit. dipping part. I'll the It's of

-- results the rapidly, quarter's revenues of almost power we now and think -- so happening speak is and because this direct platform grew the I bottom quarter. benefit this line we next a inverse to the flow-through saw

a infrastructure, adversely a the enterprise but down. are revenue have REIT's And -- EBITDA, has increasing. certain construction through are fees that values driving We which The not decrease. is flow to direct stable construction

which of it's revenue bit little cost sizably. really is line, but at the pretty a dipping There's headwinds,

Adam Portnoy

fund would core, what ones, core plus are generating those sovereign wealth vehicles, have the I returns. plus relationships the to the -- regards With largely company existing core core, which has, are type call in

generally, funds current lack environment the given are in of relationships. looking I'd sort their think, they're expectations our for, call, capital increased Sovereign now and marketplace, what in have and the increasingly closer And value-add the I return returns. type to wealth of

you would what vehicle. a receive low-teen core call different are So normally mid-teens it, core, which historically or plus returns, in than

that, So are fine. fine Those there. vehicles relationships our existing are all saying

wealth our higher. are because But environment lot relationships with don't them are the We just some we that growth to be return the funds think for going hurdles manage a today's in expect there's to continue that time. ventures those joint just sovereign of in to existing

capital speaking we've the ties also as funds And grow statement on sort of where we fund times, And that blanket debt sovereign organically think, during I said that higher. is probably with where areas couple are what capital can in for the come wealth a the institutional sort to private we mentioned year I've are interacting of I think expectations residential and a back call, or is return that's to maybe been a I generally discretionary fund, 'XX. we're the and think which which areas raise into trying the around will later of

But those are all types sort of mid-teens type a -- the funds I'm that value-add talking or about returns generate call we returns. on a those low-teen basis type of it returns -- or

have And looking the we're as are that's sovereign for for. because why sort of return so as that talked is they're also looking and funds we market Those focused just ones we the that well the to. the on wealth that that's what criteria relationships

to would more putting work I to sovereign as if or that estate, they part money at I as funds, are today that why strategies real funds money business wealth we're are broadly you, in are tell -- which well. debt speaking, is people most debt looking on are work think credit focused our looking putting at strategies of private

Operator

question-and-answer to over Adam like the turn to and This Chief conference any Officer Executive for I now would President remarks. closing concludes back our Portnoy, session.

Adam Portnoy

that us our Thank you for call. Operator, joining today. concludes all

Operator

you Thank concluded. now has conference attending today's presentation. for The

now You may disconnect.

The RMR Group Inc. (RMR) 8 Feb 242024 Q1 Earnings call transcript